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Where to Put Money During a Recession

With high interest rates, slowing growth, and large falls in stock values, many experts now expect the U.S. to enter a recession in the coming months. Do you know where to put money during a recession? We look at some safe places to stash your cash while still allowing it to grow.

Smart Stash: Four Recession-Proof Places to Keep Funds

A recession is a period of sustained economic decline, meaning the overall economy gets smaller rather than growing. Without growth, the value of most investments stagnates, while riskier businesses can lose money or even close.

It pays to be smart about where you keep your money. While your bank account is hard to beat for safety, high inflation means your hard-earned cash is worth a little less every day, while most banks pay little to no interest on many conventional checking accounts.

We take a look at the pros and cons of some options other than regular checking accounts that keep your funds safe, and accessible while allowing you to earn some money on your deposits.

1. Saving Accounts

There’s a good chance you already have a savings account. Like checking accounts, they’re federally insured and are generally the simplest and safest place to keep cash in good times and bad. Other advantages of savings accounts include:

  • Simple to open and maintain
  • Deposits are fully insured
  • Low or no minimum balance or fees
  • Some interest on deposits
  • Your cash is instantly available

The major disadvantage of most savings accounts is that interest rates remain low—especially compared with currently high market rates—and you may only earn money for deposits over a certain threshold. That said, they’re probably the best place for small amounts of cash, with many credit unions offering slightly better interest rates than commercial banks.

2. Money Market Accounts

A money market account is great for larger sums, offering significantly higher interest rates. While money market accounts typically require higher minimum balances, they still offer all of the security of conventional deposit accounts. Credit Union of America’s (CUA) Balance Boost and Performance Plus accounts, for example, are both insured up to $250,000 by the  NCUA.

Different types of money market accounts are available for different types of investors. CUA’s Balance Boost money market account, for instance, offers competitive interest rates on deposits as small as $100 on a tiered system, with amounts up to $2,500 earning the best rates, making it a great way to start saving a nest egg, even in tough times.

CUA’s Performance Plus account, by contrast, is designed to reward those able to set aside $25,000 or more, with progressively higher interest rates for more significant balances, making it an ideal, worry-free place to safely grow a significant lump sum, even during a recession.

Other advantages of money market accounts include:

  • Direct access to funds
  • Some checking account features
  • Easy to open and operate

Aside from needing to maintain a minimum balance in order to earn interest, the chief disadvantage of money market accounts is that the annual percentage yield (APY) on rates is variable and therefore potentially can drop in line with market conditions.

3. Share Certificates

Share certificates, or certificates of deposit, are offered by most banks and credit unions and give investors a safe and predictable way to access higher interest rates, provided they agree not to withdraw funds for a period of a few months to several years. Rates are reliably above those of savings accounts and will outperform money market accounts over longer terms.

Other advantages of share certificates include:

  • A fixed APY, so you know what you will earn up-front
  • Higher rates on longer terms
  • Your principal is FDIC or NCUA - insured up to $250,000
  • Easy to open and maintain

At the same time, potential disadvantages of share certificates include:

  • Limited access to funds
  • Your fixed rate stays the same even if rates rise

The stability and predictability of share certificates make them a go-to choice for many investors, especially during the uncertainty of a recession. Credit unions like CUA offer a choice of CD products tailored to the needs of different types of investors.

4. Stock Market

Stock markets offer a wide range of complex products and the opportunity to make—or lose—a lot of money quickly. Unlike deposits at a credit union or bank, most investments in stocks are not insured and you can lose some or all of your investment if prices fall after you buy in.

Stock markets also typically fall as confidence evaporates ahead of a recession, and prices can remain volatile until the overall economy improves. On the plus side, stocks offer:

  • Far higher potential returns
  • A wide variety of investment options
  • The ability to cash out at any time

On the negative side, real risks remain including:

  • Loss of your investment and earnings
  • Complex fees and charges
  • Hard-to-understand regulations and terms

If you choose to invest in the stock market, it’s wise to do so with a trusted advisor who can steer you towards investments suited to your risk profile, including diversified mutual funds or guaranteed-return federal bonds.

Recession-Proof Your Money

Smart planning can take much of the worry out of a recession. Wise choices about where you keep your money mean you can face tough times with confidence knowing that your savings will continue to grow safely.

Credit Union of America is your financial partner in good times and bad. We offer our members products that deliver competitive growth even when the economy is in the doldrums. Click below to learn more about how our Performance Plus money market accounts can keep your nest egg safe in the toughest of times.


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